He said problems were particularly stark for the bottom 10 per cent in society, who had seen real wages fall significantly since 2008.

‘Today child poverty is a problem for working families rather than the workless or the workshy,’ Mr Milburn said.

‘Two-thirds of kids officially deemed poor in this country are in a family where someone is in work.’

He added work was no longer a ‘cure for poverty’ and both the Government and employers had to address the question of how to ‘make work pay’.

‘I think it is a job for both (Government and companies). Tax credits have got a part to play... but employers have to look again at the wages they pay and the career opportunities they provide.’

The Labour party has said it would increase the minimum wage but has shied away from promising to introduce the so called living wage, which would see wages rise from the minimum £6.31 per hour to £7.45 UK wide and £8.55 in London.

A number of Conservative MPs have also suggested the Government should look at whether wealthier pensioners should be stripped of universal benefits such as free television licences, winter fuel payments and free bus travel passes.

But the Prime Minister has made clear on numerous occasions in the last year he has no intention of breaking his 2010 general election promise to protect universal benefits for all pensioners, having witnessed the damage Nick Clegg suffered to his personal reputation after he broke his election promise on student tuition fees.

When Mr Cameron’s spokesman was last asked about the potential means testing of universal benefits he said there would be no changes in the March 2015 Budget, meaning that in effect universal benefits would stay in place until at least 2016, almost a year after the election is due to take place.

Worse off: Average working families wages were lower than at any time in the last 15 years they report showed

Even before the report was officially published, Mr Clegg made clear that he did not support significant benefit cuts for pensioners.

Writing in the Daily Telegraph, he said: ‘It (the report) has many powerful recommendations, such as the need to ensure childcare funding makes work pay even for families on low incomes, and the need to do more on vocational education.

‘But it also makes some more debatable assertions, about the appropriate balance of fiscal consolidation between different age groups, for example - punishing pensioners isn't going to help a single child achieve more in life.’

Mr Milburn said today: ’I think Nick is right to say that it would be wrong to punish pensioners. I think the question is: is it right that at a time when working families are seeing their wages stagnating and their public services being cut that wealthy pensioners have their benefits protected?

‘I think there is a strong case for looking again at things like the winter fuel allowance or free TV licences, particularly for better-off pensioners in order that we ensure there is a fairer sharing of the burden.’

Labour MP Frank Field said: ‘Anyone - like an MP - who works with talented young graduates for a decade or more knows that they will achieve far less in respect of material possessions than established MPs have already achieved.

‘When I left university I expected to get a job, be a member of a generous pension scheme, acquire savings and buy at least one home. The young people working with me know they're lucky if they're able to achieve just one of these objectives.

‘To say that today's children and young people will gain far less material possessions than their parents is old hat. What we need to know is why there has been this huge shift in rewards and then do our best to counter them.’

The report found that the Government's austerity programme has been ‘regressive’, with the poorest 20 per cent bearing more of a burden than any other sector of society other than the very rich.

It also found child poverty costs the economy around £29bilion each year - £1,000 for every UK household – while tackling poverty could lead to a contribution to the GDP of £56billion annually by 2050 or 4 per cent of economic output.

Older generation: Dependency among the elderly is expected to almost double from its current level in the next 50 years, the Commission said

Ministers had been ‘too slow to act’ over youth unemployment and allowed an ‘inter-generational injustice’ which sees better-off pensioners protected but families with children bearing two-thirds of spending cuts.

The findings of the report come after the Labour Leader Ed Miliband and David Cameron clashed in the House of Commons at Prime Minister’s Questions yesterday over unemployment and the cost of living.

The Social Mobility and Child Poverty Commission report called on the Government to:

Target to end long-term youth unemployment by increasing learning and earning opportunities for young people who should lose benefit if they fail to take up offers of education, training or work

Raise the minimum wage

Switch childcare funding from higher-rate taxpayers to parents on benefits

Paying teachers more to teach in the worst schools

Pressure on employers to provide higher minimum levels of pay and better career prospects, enabled by higher skills

Require half of all firms to offer apprenticeships and work experience

End unpaid internships, and pressure on the professions to recruit from a broader cross-section of society

Even before the recession of 2008, Britain was becoming more unequal, with the top part of society prospering and the bottom stagnating, and this trend is unlikely to be halted by economic recovery, the Commssion warned.

The Government's obligation to end child poverty by 2020, enshrined in law by the last Labour government, would ‘in all likelihood be missed by a considerable margin’, with perhaps by as many as two million children living in poverty at that time.

The report added class was now a bigger obstacle than gender to entering the professions.

Moreover, middle-class parents, squeezed between falling earnings and rising house prices, university fees and youth unemployment, now fear their children will grow up to be worse off than they have been.

‘Poverty touches almost half of Britain's citizens at some point over a nine-year period and one third over four years,’ said Mr Milburn.

‘Today child poverty is overwhelmingly a problem facing working families, not the workless or the work-shy. Two-thirds of Britain's poor children are now in families where an adult works. In three-quarters of those households someone already works full-time. The principal problem seems to be that those working parents simply do not earn enough to escape poverty.

‘A job remains the best safeguard against being poor. But it is not a cure for poverty.

‘Over the last decade earnings growth has been lagging behind prices. More and more people are at risk of poverty as a result. Today the UK has one of the highest rates of low pay in the developed world. Five million workers, mainly women, earn less than the Living Wage.

‘These are the people that heed the urgings of politicians of all hues to do the right thing, to stand on their own two feet, to strive not shirk. Yet all too often the working poor are the forgotten people of Britain. They desperately need a new deal.’

‘Just as the UK Government has focused on reducing the country's financial deficit, it now needs to redouble its efforts to reduce our country's fairness deficit.

‘If Britain is to avoid being a country where all too often birth determines fate, we have to do far more to create more of a level playing field of opportunity. That has to become core business for our nation. We look to Government and others to make it happen.’